Big elections in Mexico and India. In Europe, the ECB cuts rates and in
the US all eyes are on the jobs numbers. This is Bloomberg Wall Street Week. I'm David Westin. This week, Ralph Schlosstein of Evercore
on getting deals back on track. We're actually in a period
of returning activity. Raghuram Rajan of the Booth School. On what
the Indian election means for investors Hopefully a more democratic India,
which is what this election means,
will actually enthuse some of them. And Ford CEO Jim Farley
on the return of Detroit and the U.S. auto industry. We're in a different era
where Detroit is growing after decades. We begin with the markets and their reaction to those US jobs
numbers out on Friday. Once again, the labor markets surprised
the upside, adding another 272,000 jobs. With earnings
increasing 4/10 of a percent, both well above what was expected
and at the same time the unemployment rate
paradoxically ticked up to 4%. The bond market reacted with a vengeance
as the yield shot up 14 basis points
to 4.43% at the end of the week. That,
until Friday was all about falling yields. The stock market, though, once again
seemed to take it pretty much in stride. For the week,
the S&P 500 was up 1.3% to close at 5347. That is nicely above that median number. Our Bloomberg elves had for the year
end of 5200. And the Nasdaq,
it was up 2.4% for the week. To take us through all this. Now we welcome Sarah
Ketterer of Causeway Capital. So Sarah. Thank you so much for being back with us.
Really appreciate it. So explain exactly
what the market reaction was this week is because the stock market
really didn't react to vigorously, although the bond market
did to these jobs numbers. Well, thanks, David. The stock market is likely taking its cue
from earnings more than it is any of these potential underlying impetus
for changes in interest rates. The likely most investors recognize that the Fed
is in a difficult position and lowering rates might be tough
with this sort of strong data. On the other hand, earnings
coming out of some of the market leaders still looks really good, and that's
probably what's keeping the market afloat. So I wonder about this question
of interest rates. There's a lot of speculation
about what's going to happen this year for the Fed is went into
the year with six six rate cuts baked in. We're way off of that now at this point. But what about for the longer term? Are we getting a sense,
maybe the longer term initiatives that some people thought
the neutral rate will be higher? And if so, what does that mean for
you as an equity investor? Well, if you care about valuation,
you have to use tools like discount rates. In other words, a stock is just worth
the present value of all the cash it can generate into perpetuity
discounted to present. And the higher that discount rate goes,
the less the cash flow stream is worth. Or they give it another way that
the valuation multiples need to come down. So prolonged higher rates
is a kind of a sobering effect for markets, and investors
need to be very careful about what we pay. And it also makes fixed income
a very viable alternative to equities. So there's competition out there. So higher rates, if there are sustained
also have economic impacts that we have to take into account
when we do valuation work. So there are all myriad of reasons
why sustained higher rates can lead to a tougher environment
for for stocks, not just because companies earnings
may be under pressure, but also because investors might want to go elsewhere over
any reasonable period of time. The stock market's done pretty well. Take the S&P 500, for example. But there are few stocks
have really driven it disproportionately. Some of those big tech stocks,
air stocks, can they keep going? They could. It's very hard
to call the tops of any of these stocks that had so much momentum behind them. And have sold their product
like Nvidia far out into the future
if they look so certain. And yet as the price rises,
it gets closer to something that approximates fair value. And we're not seeing the big earnings
upgrades any longer. Little piece of that is slowed. So it's very likely that these big market
leaders, at least for the time being, the next 12 months,
have seen the bulk of their returns. Now, the question is, what's
the next set of stocks that will benefit from the same theme that propelled
these big these big market leaders? And if it's not CPU, it's not the chips and it's not the servers
or the data centers, then what? And there are some fascinating, great stocks in that layer beneath
who should benefit from, for example, the demand
for much more memory. So that's D-RAM memory, not just the high
bandwidth memory that Micron has. And Samsung Electronics
soon will have and Micron in the U.S. but even the commodity memory is
will be more in demand because there's only so much factory floor
space, there's almost only so much room to make these high bandwidth memory chips. They're faster. They're they're they're more,
less power consumptive. So memory, so interesting. And stocks like Samsung traded
very reasonable multiples. What about some of the stocks
that have actually taken something of a hit, particularly
the information tech services area and the assumption that perhaps a,
I generally I really hurt their business? Is it possible
the markets overreacted with some of those out there? Those stocks had a terrible time
when cloud was first transitioning because the enterprises say,
oh, we can do it ourselves. And they very much can't. First of all, for most companies, they need to build the infrastructure
to adopt AI tools. So infrastructure comes first
and then application second. And there are
you can look across almost all I.T services companies and find
that the market is very negative on them, but they have good base businesses
and without doubt and since companies like Cognizant,
for example in the US or Fujitsu in Japan, the orders will have to pick up because
enterprises were going to need help. They'll have to work. Enterprises will have to work with their
IT services companies in ways they had never done before
in order to implement AI. So take us beyond the US borders.
If you would, for a moment. The US stocks have been the place to go. US has been in general
the place to go for investment. Does there come a point where actually there are some interesting
possibilities overseas? Well, overseas markets in general traded massive discounts to the US and as we've told our clients, that
discount doesn't need to close entirely. It's a two standard deviation
high versus the ten year average. It just needs to close a little bit. And we think it's very likely
that as the US market cools off with the sustained higher rates, environment
rates are coming down outside the US, that we'll see some improvement
in multiples offshore. But they because the gap is so wide, it's
historically wide in valuation terms,
that makes non-U.S. less risky in a way, it has less
to give up than does the US market. And and that's one of the reasons
why we find or let's just say, are finding so many stocks outside the US invalidates
this top down view. How much was Japan
you mentioned for jujitsu earlier? Well, the Japanese market was discovered a year ago
and it's been bid up feverishly. But there still is a big market
and there are still companies there that the market has yet to embrace, not just it services,
but in automation, for example. Sarah, it's always such a pleasure
to have you with us. Thank you so much. That is Sarah Ketterer of Causeway
Capital. Coming up,
are we finally seeing deals pick up? We'll ask Ralph Schlosstein of Evercore. The last two years have been a period of of low activity driven by uncertainty. That's next on Wall
Street Week on Bloomberg. This is Wall Street Week. I'm David Westin. Higher rates and greater uncertainty
have put a damper on corporate deals
coming off of what had been record years. To fill us in on where things stand today,
we welcome back now Ralph Schlosstein. Evercore Chairman Emeritus. Ralph,
great to have you back with us. Where are we right now on deal flow? Well, we're actually
in a period of returning activity. So if you look particularly in the U.S. announced transactions
in the first half of the first five months of the year
are about 40% of last year. The last two years have been a period of of low activity, driven by predominantly by uncertainty rather than economic uncertainty, because that is the enemy of M&A activity. And if you look back over the last
45 years, go back to 1980. M&A has generally been characterized by 5 to 8 year up cycles
and 2 to 3 year down cycles. And we're kind of at the end of that 2
to 3 year down cycle and at the beginning of what I suspect will be a
an extended period of increased activity, 24 being better than 23
and 25 being better than 24. So as you note here at Bloomberg,
we pay a lot of attention to the Fed. Are they going to cut it?
They're not going to cut. Are they going to raise what's
going to happen the beginning of the year? There is something like six rate
cuts priced in. Now we're down to maybe one. Does that affect CEOs? Think about doing deals?
It really doesn't. What they care
more about is the availability of debt, capital rather than the cost. And I think we're at a period right now where the cost of debt capital,
the risks are asymmetric. The risk that it goes up
is is lower than the risk that it stays where it is or drifts down. So that's kind of off the table today in terms of transaction activity. Economic uncertainty
and political uncertainty now are not unimportant in having people think hard about
whether they do transactions. If you talk to private credit, people,
as I know you do all the time, they say, yes, we're lending a lot of money,
but we're much more careful about it. We put a lot more restrictions
in covenants and things like that on it. Is that true in your experience? No. To be honest, I think credit there's
this thing called the credit cycle that we've heard about
for many years and credit. There are periods of time like right now where people feel some amount of pressure to put assets on the books,
whether they're private credit or banking. And that tends to weaken a little bit. The underwriting discipline
not thrown away because I think we all learned from 2008 that discipline
and credit is really, really important. But I recall once when when I was at BlackRock,
we were hired by Xerox to make a decision about what they should do
with their insurance business and one of the things we did is we visited five of the smarter people in the insurance and property and casualty
business, one of whom was Warren Buffett. So we flew out to Omaha
and we met with him and he talked about the property
and casualty business. He said, you know,
I've bought every single one of my underwriters
a golf club membership. And the only thing that I do is I tell them when they must use their golf
club membership and when they can't. And his point was, there are some times when the underwriting cycle is really bad
and I want you all to play golf. And there are times
when it's really attractive and that's when I want you to not play golf
and write lots of policies. And, you know, bankers and private credit don't have that same luxury. So the, you know, disciplined not in major ways, but in minor ways ebbs and flows
and pricing the tightening of spreads. So we've had a period where longer term
interest rates have risen. That has been largely offset
by a tightening of spreads versus the Treasury market. So a BB borrower today
can borrow more cheaply than they could a year ago,
notwithstanding the fact that Treasury rates are up
80, 90 basis points. I think there's a general sense
that there's a pent up demand for deals in private equity. The private equity doesn't
want to sell a lot of assets right now because interest at higher,
the prices have come down. Is that accurate? In fact, is do you see a pent up demand
to sort of release some of these assets? There is a
a pent up demand on both sides in private equity,
most specifically, and more immediate is the need to convert investments into returned cash for the limited partners. If you work at a private equity firm
today, you've probably received the T-shirt
as a gift from one of the large sovereign
wealth funds or U.S. pension funds. And it says DPI is the new IRR and that means your return to capital is now
the dominant concern of limited partners. You talked about cycles in M&A. Are there also trends because most recently some of the deals
we've seen have not been conglomerations really bringing together bigger companies
but actually focused spinning off? If you look at GE, you look at DuPont. Is that a trend right now? And are people
more interested in focusing? I would say, you know, over 40, 50
years, you've seen a period of time when conglomerates were overvalued relative to the sum of their parts and a period
when they're undervalue viewed. We're in one of those periods where in companies that are in multiple disconnected business
lines, the value of the whole company is generally less
than the value of its constituent parts. And so that is,
particularly when you add to the fact that there are activists
out there all the time looking at these companies and saying,
do the right thing for your shareholders. This aggregate rather than aggregate and,
you know, there's if you look historically over the last 20,
30 years, spin offs, break ups have generally outperformed the market. They've outperform the market
because they've, you know, sort of unleashed the entrepreneurial spirit
in a smaller business that was really operating perhaps, as, you know, part of a big conglomerate,
a little bit overlooked. And, you know,
one of the better investment approaches over the last couple of decades
is to buy these spin offs or to buy these disaggregated businesses,
because they generally outperform. Ralph Schlosstein
is going to be staying with us as we turn from the business climate for mergers
and acquisitions to the political climate. That's next. On Wall
Street Week on Bloomberg. This is Wall Street Week. I'm David Westin, Evercore
Chairman Emeritus Ralph Schlosstein, and stayed with us. So, Ralph, you were good enough to tell us
about the business climate for M&A. Let's talk about the political climate where we are right now, particularly as we're looking toward
an election come November. What are the things that might affect
actually the level of deals that get done? Well, first of all, you have to recognize that antitrust is driven
predominantly by the law. The law has not changed. There are people at the FTC and obviously the assistant attorney general
for antitrust who may have a more aggressive or less aggressive posture within the confines of the law and sometimes
not within the confines of the law. So there's no question that the Biden
administration has tried to, you know, reasonably, aggressively
slow down activity, almost any transaction of consequence. There is a discussion of that. And what you're finding increasingly where there's a judgment that the antitrust law is not being violate needed, companies are willing to go ahead and basically say,
let them take me to court. So you worked for President Carter,
as I recall, in the Carter White House, and you've been identified
with Democratic causes through the years. At the same time,
you're very much a part of Wall Street. There's sort of a prevailing sense
right now among some on Wall Street right now that it just makes sense
for them personally to have Trump in the White House
because they'll make more money, They'll be richer. Is that wrong? Well, it's very it's interesting. I once got asked
what was the very best piece of advice I received in my entire 45 year
professional career. And it was actually the first day of my
very first job when I was an economist on the Joint Economic Committee. And the staff director
had this sort of welcome talk that he gave to, you know, kids
right out of graduate school. And the gist of it
was, listen to people you can. This was a joint committee,
bipartisan committee. You're going to have disagreements
on substance, but never question someone's motives. So I do believe certainly that there are some people in the Wall Street community,
the financial community, who probably are driven to a certain extent by what's best for their pocketbooks. But I'm also, I think, open minded enough to say that there are certainly some of them
who may support President Trump, who do so because they have,
you know, particular policy agreements with them or disagreements
with the current administration. So I don't think it's purely
financial. And, you know, I happen to be, as you say,
very democratically inclined. But in this election, honestly,
I think the the stakes on policy are really important. But the stakes on support sort of our democratic
institutions are even more important. And the idea that our judiciary deserves to be truly independent, the idea that our Federal Reserve
should be truly independent, the idea that our Justice Department
should be free to investigate independently the idea that our press should feel unencumbered
by fear of reprisal. If they report, you know, unhappily on the current administration. Those are things to me
that are so important that to me, that's
a really critical part of this election. I didn't mean to suggest
it's wrong to be concerned your pocketbook because it's generally thought
in most elections. Most voters in part
are voting their pocketbook. It's perfectly, perfectly understandable. But when it comes to a Trump
administration, one of the differences potentially
with the Biden administration is taxes, the extent to which is taxation. And it's closely, I think, related
to a concern that some people express that just the Biden administration,
for whatever reason, has gotten the government just involved
in a lot more of this business and that that's not in the long
term healthy. What do you make of that? Well, I think the attractiveness of generally Republican policies
in terms of a little, you know, somewhere between a little
and a lot less regulation. Yeah, I'm not negative on that. To be very honest,
I think the most critical thing for narrowing the economic gap in this country is economic growth and regulation. Sometimes overregulation
can certainly constrain economic growth. So I think there are elements of, you know, what would be considered
traditional Republican policy that I think are very supportive
of economic growth and, you know, helping
those who are in need in our society. Tax policy. I think two things are really important. One is the share of our GDP
that goes to federal taxes. Today, it's around 16%. That's down from about 19%. We're not paying
for the government that we want, and that's a long term
non-sustainable situation. So that has to be corrected
one way or another. And the second thing is, I think, you know, the tax policy has been significantly responsible for the widening
in the wealth gap in this country. I'm one of these very rare people
in finance who believes that capital gains
and dividends should be taxed like ordinary income
rather than at half the rate, because there's no reason on the planet that when I make a private equity investment, the tax rate should be
less than somebody who's making a couple hundred
thousand dollars a year and working 40, 50, 60, 70 hours a week. I'm a minority. I probably even am a minority
in my own party in that regard. But look, I think if you look back over centuries and centuries, great societies failed because the the haves had too much relative to the have nots. And that's not a healthy thing
for America, in my view. Okay. Well, thank you so very much. It's really great to have you with us. That's Ralph Schlosstein of Evercore. Coming up, we turn to India and what the Indian election results
this week mean for investors. We'll talk with Raghuram Rajan, former
India's central bank governor. Yes, there will be some more fiscal
spending given the nature of the verdict, but I think it will help solidify
the economy. That's next. On Wall Street. Week on Bloomberg. This is Wall Street Week. I'm David Westin. India completed its national elections
this week, and to the surprise of many,
President Modi did not receive the overwhelming majority
that had been expected. For an early sense of what this may mean
for the Indian economy and for investors. We welcome now Raghuram Rajan. He is the former governor of the Reserve
Bank of India. Mr. Rajan is now professor of finance
at Chicago's Booth School. So, Professor,
thank you so much for joining us. I know it's early going, but obviously Prime Minister Modi was known for his economic
reforms, his economic projects. What do you think is made of those
in light of this narrow victory? Well, first,
he doesn't have a majority anymore with his party,
so he needs coalition partners, which means he needs to develop
more consensus as he goes along. I think that's good news, actually,
because part of what was going on with this government was
it had a lot of reforms in its first term. But the second term has been more focused
on the social agenda of the government. Sometimes the majority are an agenda. While the few attempts
at economic reforms, including the change in agricultural laws, were done
without developing a broad consensus and essentially were withdrawn
after tremendous pushback by the farmers. So this may actually mean that the reforms
that are proposed going forward have more consensus
and therefore more sticking power. Did the reforms, in your opinion,
are they likely to focus on some of the lower income families
Because the reports are at least of the politics of this election were that many of the lower income voters
did not back Mr. Modi? Yeah,
I think a big problem which the government hadn't paid enough
attention to was growing levels of unemployment,
especially amongst educated youth, a growing sense of insecurity
amongst poorer households. The small and medium enterprises
were also suffering. So essentially
the government was looking at the big, you know, capital intensive enterprises
which comprise much of the stock market. No wonder the stock market took fright
after the early election results has come back a little bit. But really, the government
has to pay more attention to these groups and it actually may help even enhance
growth over the short to medium term because consumption hasn't been strong
as these households feel anxious, You know, a revival in consumption
could help the economy grow faster. One of the things that investors have paid
attention to is inflation in India, which is certainly still has inflation,
but it's more under control than it has been in the past. Is there a risk then, of trying to address
some of the needs from the voters who did not vote for Mr. Modi, that you actually have
more fiscal stimulus and you actually have more problems
with inflation going forward? Well,
one of the sort of hallmarks of the Modi administration has been fiscal restraint. And I don't see why
they should suddenly abandon that. Yes, there needs to be
a repurposing of resources, as you know, in a recent book,
Breaking the Mold. I argue that, you know,
we need more jobs in areas like services, and that requires killing the workforce,
that requires some redeployment of resources away from, for example,
massive subsidies to manufacturing, to actually investing in colleges
and schools, in skilling programs. But I think this is something that
can be done without breaking the budget. Yes, there will be some more fiscal
spending given the nature of the verdict, but I think it will
help, you know, solidify the economy and actually remove household anxiety,
which I think would be a big win. What do you think this election may mean for the relationship
with the central government and the individual states
whose, as I understand it, in India, the states have a fair amount of power. The prime minister can't do certain things
without the support of the states. Is that going to shift now because Mr. Modi is perceived
as being somewhat less powerful? Well, it should,
but I think in in the right direction. One of the problems in the,
you know, Modi administration has been the appointment of governors
who have stood in the way of state governments
doing what they wanted to do. And not playing out as constitutional sort
of impartial governors. And as a result,
I think some of the states have not been able to sort of conduct
the kinds of programs that they wanted. I think that should be ameliorated in a new administration
where there are checks and balances on the government and where the press is a lot more invigorated
in pointing out some of these problems. I think in the last two administrations
of the Modi government, the press was cowed,
was unwilling to point out problems. I think with the press more alive,
I think we'll get stronger. Debate
and hopefully debate leads to better economic as well as political policy. And finally, Professor, speculate force, if you will, what
this means for foreign direct investment. India has been in recent times, as we talk
to investors, something of a darling, particularly as Chinese
foreign direct investments gone down. India has been
a likely alternative to that. How do you think this election
might affect the attractiveness of India
for foreign direct investors? Well, it's extraordinary, David. What you see is
while they talk about India being a good destination
for foreign direct investment, actually the numbers have been coming down
over the last couple of years and look worse
than some of the other countries like Vietnam that have been recipients
of foreign direct investment. What the problem is,
whether there's some anxiety about the direction of the government
and its policies, I don't know. But hopefully a more democratic India,
which is what this election means, will actually enthuse some of them,
seeing the strength of India's democratic institutions,
including its judiciary, to feel more comfortable
putting long term investment, knowing that the country is not going to become
politically unstable, that this is this is really good news
for foreign direct investors. I hope that's the way they take it. I don't think government policies
are going to change extraordinarily, but I think at the margin they will change
or they will be forced to change in a direction that is good. Professor,
thank you so very much for being with us. Terribly helpful. As Raghuram
Rajan of Chicago's Booth School. Coming up, the highs and lows of the US auto industry
and the Motor City it created. We go to Detroit for the story of the rise
and fall and rise again of a proud city and auto maker. The train station felt like the right kind
of challenge for Ford to be part of so that we could be part
of the revitalization of Detroit. That's next on Wall Street
Week on Bloomberg. This is Wall Street Week. I'm David West. And this week, the city of Detroit went back to its past
on the way to its future with a grand reopening of Michigan's Central station,
once a proud icon of the Motor City. Then a derelict hulk
that was nearly torn down and now restored to its former grandeur
with the help of the Ford Motor Company and the dedication of a mayor
who just wouldn't give up. Our Bloomberg Radio colleague
Michael Barr is a native Detroiter who watched the city
burn during the riots of the late sixties. I'm going to give away my age
because that happened in 67 and I was three years old
and I was in southwest Detroit. And at the time I saw the National Guard in a jeep go by. Now, being a stupid kid, I'm thinking,
Oh, gee, Joe. I didn't realize
that the big city is burning down. It's sad. You know, between
that how the auto industry really took a hard nosedive. What was Detroit's lowest point,
do you think? Oh, I think probably bankruptcy
in 2013 was rock bottom. But we had a lot of bad years before that. And I had said, I'm 65 years old in
the city of Detroit, has lost population every year.
I've been alive until last year. So that was a lot of years of auto plants
moving out, restaurants moving out, movie
theaters moving out, people moving out. The story of Detroit has long
been a story of the auto companies that helped make it sometimes for better
and sometimes for worse. Think, you know, World War
Two is a big challenge for the company. And when Henry Ford, the second,
led the company back to a revitalized state,
you know, we withdrew the whiz kids. We hired all these logistics experts from the Army after the World War Two,
and they really created this kind of bureaucratic
but incredibly efficient machine. And the company was back in the sixties
and then the energy crisis came. The company
didn't have efficient vehicles. It wasn't competitive among quality,
and it really lost its way in the seventies, as well as the city of
Detroit after the riots. And, you know, we we were lost in less than 25 years. Henry Ford personified the America dualism
and freedom of enterprise. It wasn't always this way. As the 20th century
began, Henry Ford started mass producing a new mode of transportation
the automobile in Detroit. Ford invented the first moving
assembly line in the world, and by the 1920s
had produced some 20 million model TS. My grandfather's a good example. You know, he was an educated man,
but he had a great job at Ford and built his family. His kids went to college eventually. And just like your family, you know, there are millions of people
around our country, around the world have been affected by Ford. And at that time, Ford was the pinnacle. We had 80% market
share globally of the car business. The Michigan Central Railway Station
was a result of that automotive success built in 1913 when the mythic Ford Rouge
plant was still under construction. At its peak, over 200 passenger trains
a day left the station carrying over 4000 passengers and another 3000 people worked
in the office tower above the station. But again, I see Detroit through the eyes
of a kid who remembers a beautiful city. I remember the beautiful train station. But in the end, the auto industry
that helped build Michigan Central was also a central cause of its fall
as people moved away from passenger trains and took to the cars Detroit
was churning out for the entire country. By the 1980s, it was the domestic auto
industry's turn, as U.S. sales
of the Big Three automakers peaked in 1979 and then declined steadily ever since falling victim
to a rising tide of foreign cars and with it the entire state of Michigan's
contribution to national GDP fell from over 4% to less than 2.4%. It was heartbreaking over the years
to see Dodge, Maine, close, to see Cadillac Fleetwood
close in the jobs and went with them and they went to the suburbs
and eventually they went to Mexico. By the start of this century. What was once a glorious building
had been abandoned, its windows broken, its roof open to the sky,
its marble scavenged. With the windows
gone, the air blowing through. It was depressing every single time
you came into town on the freeway. By 2013, the Detroit City Council
had voted to tear Michigan Central down, and it took a Detroit backed by Dan
Gilbert's real estate investments, a determined Mayor Duggan,
and a Bill Ford, whose family had helped build Detroit to reclaim it
and restore Michigan Central to what? As of this week, it is again. So from my first day in office, getting that train station
reoccupied was a central focus. There was no way
it was going to be demolished, just meant too much
to too many generations. And so my first month, Matt Morrow, the owner, was in my office,
had a list of things that they wanted. And I said, I want one thing. I want you to put windows
in that abandoned train station. And he looked at me like I was crazy. And I said, All people see when they look
at that train station is blight. I remember when it was beautiful. And so we made a deal
on some of the things where they spent $1,000,000
and put in windows. And the when the windows started to go
in, it had an electric effect on the city. Everybody driving by on
the freeway said, Oh, my God. For Michigan
Central and for Detroit to come back, Ford and the rest of the auto industry
had to come back as well, once again,
showing their mutual dependance, which is why Ford stepped up
with nearly $1,000,000,000 to rebuild a train station from 1913 that hadn't been used in nearly 40 years. I think it's you know, obviously
it's a family company here, Bill's vision, but also for the train station, very much as a symbol, a kind of a mark along our journey to to to create a great company. And we avoided bankruptcy,
which was amazing in the early 2000, has been to thousands. But to build a vibrant company, you know, in the world, the digital vehicle world, the train station felt like the right
kind of Challenger project to for Ford to be part of so that we could be part
of the revitalization of Detroit, which had really been kind of used
by almost the national media as a, you know, example
of the decay of the country. And and this felt like the kind of project that would be emblematic of our recovery
as a as a company. You know, it's a very American story,
really, of of starts and stops of
of great leadership at moments. But at other moments,
a loss of focus on the customer. I mean, this is this is the truism
of an industrial company. You have to have cost and quality competitiveness
and that changes the benchmark changes or at many points of the you know,
we almost went bankrupt with Model T, If you look at the company,
this has happened many, many times. It's a company that's been through a lot. But it's a company, though, that
when it gets his back against the wall, something magical happens. Where are you? On the road back. How far along that road are you? Our backs are off the stovepipes. We're well into the messy middle
of the most transformational time. Other than the Model-T. You know, we've never gone through
this electrification transition for low CO2 drive trains. We've never had a digital product before. We never could give people time back
like we will with level three autonomy. We're investing in all that
enabling technology. We're very profitable with our
pro-business and our combustion business. We have the iconic vehicles like Bronco
and Mustang that are doing an F-150 that are doing so well, but
we still have a lot of execution to do. I'd say, you know, we're
just a few years away from another vibrant period for the company. And as leaders,
we see it before everyone else sees it. And so it's it's exciting for us, but we feel a tremendous amount
of responsibility. For your parents, for you, for my grandparents, as Ford and the other Detroit
automakers have fought their way back, they've brought jobs with them. Michigan unemployment peaked. Apart from the pandemic in 1983, at 16.5%,
well above the national average. And now it's all the way down to 3.9%
right at that national average. But when I started, I sat with Bill Ford,
I sat with Mary Barra, and I sat then with Sergio Marchionne,
who was running Fiat Chrysler. And I said, look, if Detroit's going to come back,
we've got to come back on our strength. We're not going to be the tech hub,
the biomedical hub. The next time you cite a power plant, please ask them to come talk to me first. And it was Bill Ford who was the first one who had flex
and gate, made parts for Ford trucks. And ultimately we landed a Jeep plant
with 5000 employees,
almost all Detroiters being hired. So that was terrific
because I had a large number of unemployed who had high school degrees and we needed
good paying manufacturing jobs. Now, with the University
of Michigan grad school being built, we are now competing for the tech jobs,
the jobs of the future. And that's exciting as well
because in this city we need both. We need the people building the cars. We also need people
designing the jobs of the future that on 14th Street,
next to the train station is the only public street in America
where the road charges your car. We have a self-charging road while you
park there because the coils underneath will charge it. That's what we're doing. It's the technology future. But it isn't just us technology
that's pushing the auto industry forward. In the 1980s, it was the Japanese manufacturers
who put pressure on Detroit's Big three. This time it comes from Asia again,
but from a much bigger source. China is a force in the world economically and apparently
in increasingly electric vehicle space. How vigorous a competitor are they? How vigorous a competitor
should they be to unionize? Dave? I've been doing this for 40 years. I worked for Toyota
for a couple of decades. I've never seen a competition like this. They have full sponsorship
of their government. The government bet on EVs
before anyone else in the world. They're the largest market in the world
and now they're in the most important market in the world. We can compete and win against them,
but we have to bring our A-game and we have to learn a lot of new things. This will be
the ultimate test of companies like Ford for the next hundred years. I fully believe we can do it. So we've talked about a very proud time
for Detroit and for Ford and then losing some of that pride with sort of losing the way
both for Detroit and for Ford. How do you make sure
you don't lose it again? How do you make sure you don't make the same mistake
in a different time and different place? This is the this is the most important question
for a CEO. And I think really the only answer is culture. It can't depend on me. It has to depend on kind of the the heart and soul of our workforce
who comes in every day. And their commitment to quality
and cost is really only the only way to be enduring
and sustainable. Great companies like Toyota did that to
empower the factory worker to pull that. And Don Cord,
when they saw something wrong. And the only way I believe to sustain
that at Ford is not me. It's a culture
that is obsessed with quality and the customer and cost. The future of Detroit can't depend on any single person or any single company. It needs business and talent and community
and leadership all coming together. Perhaps there's
no better leading indicator for Detroit than the comeback of its hometown
NFL team, the Detroit Lions. All my girls who live here,
they're Lions fans. I mean, this is so fantastic. I mean, the city was alive. I think it's another example of the stick to oddness of America and of Detroit. We made the championship game against the San Francisco 40 Niners
when we made that. We've been through so much
we didn't win it. But I'm proud of my teams. I enjoy Detroit. Detroiters know what I'm talking about. If we got it in our hearts,
we had a whole bunch of fight and people will look at us like, you know, only came from Detroit is like,
Yeah, but look at us now. And I am so proud. I always say I'm a native Detroiter
and adopted son of New York. Coming up, it wasn't just Detroit
that was nostalgic. This week we go through the other places
where the past came back to haunt or inspire us. That's next on Wall Street Week on Bloomberg. Finally, one more thought. William Faulkner famously wrote that
the past is never dead. It's not even past. This week, we had our fair share of reminders of the past
remaining very much with us in Detroit. The iconic Michigan Central Station
came back from the near dead and emerged as a gleaming new home
for Google and high tech mobility. This is going to be an innovation hub
with software engineers and our Ford pro-business
and many non Ford people in the building. Meme stocks like GameStop,
which seem also 2021, came roaring back to life, with Keith Gill
posting on social media what appeared to be a $116
million position in the stock, together with a green reverse UNO card,
which seems a bit retro in and of itself. The only people that I really dislike
and loathe in this entire situation are the people who pretend that buying
GameStop or buying AMC is some sort of like revolutionary act, like sticking it
to the man or like doing it. It makes no sense. There's no like there's no there there. And speaking of social media,
this week, former President Trump returned to the question of Tik Tok, but came up
with a very different answer this time. When he was president,
he wanted to ban it. Now that he's on a quest to attract young
voters, he's decided he'd rather join it. The president is now on Tik Tok. My honor. And when it comes to politics, what could be more nostalgic
than a rematch of Trump and Biden, something we saw most recently
only four years ago? I have never tried to forecast
the outcome of an election where you had the current incumbent running
against a former incumbent in big media. This week we saw two very different
examples of the past, not ever fully going away as Rupert Murdoch got married
for the fifth time at the mature age of 93 to a woman
26 years his junior. But Mr. Murdoch's marriage may have been eclipsed
by a bigger union in the media world as Paramount moved toward merging
with David Ellison's Sky Dance studio, something
that's been in the works for a while now. And that is very much driven by the media
revolution of streaming, which is yet another example of the past
never being entirely behind us. We've had periodic upsets
in the media world that almost always
bring corporate shakeups. When I went to cap Sydney's ABC in 1991,
broadcast television was in the process of being turned upside down
by what we used to call basic cable. A new way to get better reception
of network reruns that turned into a powerhouse of original programing
tailor made for particular audiences. Everything from drama
to sports to news to cooking. And as much as we talked about it
to many of us at the network, told ourselves that this upstart cable
could never challenge the strength of the networks. But it's safe to say that was a simpler
and occasionally more ridiculous time. The decision has been passed down
to make Veronica our co-anchor. Now, let's hope that as big media
makes the big transition this time, we can leave some of the past
truly behind us. That does it for this episode of Wall
Street Week. I'm David Westin.
This is Bloomberg. See you next week.
